Investment in machinery and industrial equipment fell 11.3% during the first trimester of 2015 compared with the same period in 2014 according to a report by Uruguay’s Chamber of Industry.
Among imported capital goods the report highlighted decreases in packing machines, roasting ovens for metallurgy and boilers.
“This behavior is in large part aligned with the poor performance of industrial exports [from Uruguay] which has been dragging for some trimesters and worsened at the start of this year” reported Uruguay’s Chamber of Industry.
The Uruguayan sector which showed the greatest increase in investment was food, tobacco, and alcohol where investment increased 87.9% compared the previous year. Excluding this sector Uruguay’s investment fell 24.8%.
The sector’s increased investment came mostly from companies in the milk and beverage sub-sector. Lower than usual levels of investment in this sub-sector during 2014 explains the dramatic increase.
This Uruguayan Business Brief is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry. For more resources on Uruguayan Business visit the Uruguay Business Reports Store.
Uruguay’s current timber production could not support a third wood pulp plant
According to a report by Uruguay’s Office of Livestock and Agriculture Policy (Opypa), Uruguay’s timber industry will produce an average of 10 million cubic meters of wood to be processed into pulp. Timber for solid wood production is estimated to average 4.2 million cubic meters of which 71% is expected to come from pine and 29% from eucalyptus.
According to Opypa’s analysis, Uruguay’s projected timber production is insufficient to supply a third wood pulp plant. The agency recommends expanding timber plantings into several areas of the country that are well suited for it.
Opypa claims Uruguay has 2.6 million hectares suitable for timber production which are currently deforested. The majority are located in Uruguay’s center east region. Uruguay’s other regions also have room to expand timber production. Opya estimates in each of Uruguay’s regions only half the land suitable for forestry is currently planted on.
The report states that in 2012, the timber industry employed 12,000 workers. Of which a significant portion are classified as skilled workers.
In 2009, 45% of workers in Uruguay’s silviculture industry were classified as skilled compared with 24% in the other sectors Opypa monitors (ranching, agriculture, dairy, and grain).
Between the last two Opya censuses the number of firms in Uruguay whose primary income is from forestry has decreased by 230. This decline is at least partially due to consolidation within the industry. The number of firms under 500 hectares decreased by 419 hectares while the number over 500 increased by 189.
Challenges for Uruguay’s Lumber Industry
One of the principal concerns raised by Opya’s report is whether Uruguay’s forestry firms can meet the growing demand from Uruguay’s wood pulp industry for raw materials.
Uruguay’s new Montes del Plata wood pulp plant is expected to double the country’s production capacity and its wood pulp exports. The projected timber supply through 2030 is sufficient for the two plants. A third plant would require an increase in timber production.
Adding value to wood exports is another challenge. Uruguay’s wood board production is small but has increased recently, between 2012 and 2013 the value of these exports rose by 16%.
This Uruguay Business Reports news article is a translation from the Uruguayan newspaper El Pais. The original article is available here. Uruguay Business Reports translation by Donovan Carberry. Image is from Uruguay’s El Pais.
Montevideo’s Carrasco Airport is expected to tie the record it set in 2011 for most passengers passing through
The 2012 bankruptcy of Uruguay’s flag carrier airline Pluna created significant concern within the Uruguayan government about the loss of air connections to Montevideo. After extensive negotiations, Uruguay’s executive branch chose to support a new company employing Pluna’s former employees to prevent losing the country’s air connections.
The head of Alas Uruguay (the name of the new project which was formally announced this month), Daniel Olmedo, told the International Air Transportation Forum organized by Uruguay’s Transportation Ministry that the country’s connectivity problem has not been solved. He added that when Pluna was operating Montevideo had 350 regularly scheduled flights a week. “Now there are 159; we have to recover the regular flights that were assigned”, he said.
However, data from Montevideo’s Carrasco Airport tells another story. Although, the number of weekly connections is down, Carrasco is about to tie its record for passengers passing through the airport.
When the company Puertas del Sur took over operations at the airport in 2000, the terminal area saw 860,000 passengers between arrivals and departures. By 2011 that number had almost doubled to reach a record 1,700,000 passengers.
The director of Corporación América (which owns Puertas del Sur), Eduardo Acosta, told the Uruguayan newspaper El País that Carrasco will reach that 2011 record this year, even without the national airline.
“In 2011 we had a vibrant Pluna with 13 airplanes flying every day. Today, without those airplanes we have achieved the same thing. How? With airplanes that are more full and with companies that are more profitable” said Acosta. He said that the airport is stable and emphasized the work done with the Transportation Ministry to bring about the arrival of Air Europa in Uruguay and the return of Air France.
Qatar Airlines and Turkish Airlines are currently in negotiations with the Uruguayan government on doing business in the country.
Nevertheless, Acosta said that the airport still has not recovered many of the passengers transported by Pluna who connected through Montevideo. He also said that the newly formed company, Alas Uruguay, has a excellent opportunity to capture those customers. “Between 300,000 and 400,000 passengers who today do not have Carrasco and that [Alas Uruguay] could recover, because they are passengers are in the region and need to connect through Montevideo”, Acosta said.
At the International Air Transportation Forum, Acosta spoke on Alas Uruguay saying “there are many things that businesses cannot do alone; they need the state”. He added that Alas Uruguay will require government help. Nevertheless Olmedo, the head of Alas Uruguay, during his presentation expressed that those behind the new startup air company are not in favor of “protection” and that the company wants to compete with other companies in the sector.
Uruguay’s Transportation Minister Enrique Pintado, said that Alas Uruguay will receive government support. He said that the project has potential, but they need to identify weaknesses and establish a good strategic plan.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País by Maximiliano Montautti. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Texhong, a Chinese textil company has acquired 160 hectáreas in San José, Uruguay and is awaiting authorization from Uruguay’s National Environmental Management agency (Dinama) to begin constructing on a $250 million USD factory.
Texhong’s site is located on the Route 1’s 46 kilometer. All of the factory’s production will before export, principally to Brazil and other countries in the region.
The director general of the San José local government, Francisco Zunino, told the Uruguayan newspaper El País that shortly the company “will begin to address construction; they have already been consulting businesses in the sector and they have an architectural firm designing the project”.
Zunino reported that the town is collaborating with the company negotiations with UTE, Uruguay’s state power company, since the factory will have high energy requirements.
The work will be done in three stages. In the first stage, which will begin once the project has received the necessary authorizations, Texhong will build a 40,000 square meters of storage sheds at an estimated cost $80 million USD.
The first stage will require a work force of two hundred people. One hundred and fifty of those will be from the department of San Jose (Uruguay’s administrative regions are called departments). Zunino explained that “the other fifty will come from China to train the local workforce”. When the project is finished, sometime in the next three or four years, the factory will employ six hundred people.
Texhong produces raw material for textiles that are later used in clothing industry. It is one of the main producers and traders of textile raw material in China. The proposed factory in Uruguay is Texhong’s first initiative in Latin America. They have eleven manufacturing plants in China, as well as factories in Vietnam and Turkey.
Texhong’s entrance into Uruguay will help revive the country’s textile sector, one of the industry’s most affected by Uruguay’s decline in competitiveness.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Despite the theoretical benefits of the customs union, Uruguay’s exports to Mercosur have declined dramatically this year
During the first eight months of 2013, Uruguay’s exports to Argentina fell 5.6%, exports to Venezuela fell 15.1% and exports to Paraguay fell 9.2% compared to the first eight months of 2012. Although Uruguay’s exports to Brazil continued to grow, they rose only .1%.
Put together, Uruguay’s exports to Mercosur from January to August 2013 fell 3.9% compared to 2012 and totaled $1.748 billion USD. Exports to non-Mercosur countries rose 4.8% and totaled $6.478 billion USD.
The executive secretary of Uruguay’s Exporter’s Union, Teresa Aishemberg, told the Uruguayan newspaper El País that the organization does not expect positive changes in Argentina, Brazil or Venezuela this year. However, they did see an increase in exports to Paraguay during August.
Aishemberg said that the situation with Argentina cannot improve as long as President Cristina Fernández Kirchner’s government maintains the trade barriers it has imposed. “Evidently we have to look to other markets, but not all products are competitive outside the region” Aishemberg said.
The economist Pablo Moya from the consulting firm Oikos agreed with Aishemberg about the situation in Argentina. “There is a real loss of the competitiveness that Uruguay always had in comparison with Argentina beyond the increased costs”, he said.
Moya does not expect any changes in Argentina’s trade policies under the current president. He was more optimistic about the situation with Brazil. “With them there is a greater possibility that they will reverse and again be a market demanding Uruguayan products, a strong destination for our sales”, he said.
Nevertheless, Moya does not expect significant changes in regional trade soon. “Significant change with Argentina and with Brazil would be slow, the outlook is not reversible in the short-term”, Moya said. Given this situation Moya also expressed the need for Uruguayan exporters to look toward other markets but didn’t negate the difficulty of doing that. “Many [exporters] that want to trade outside the region aren’t able to. They lose competitiveness.” he said.
“For a long time exporters have been looking toward the rest of the world, principally because of the tariff barriers and the bureaucratic obstacles that they are applying, while in theory the free circulation of goods and service within Mercosur generates advantages”, added Moya.
With a prediction that conditions will not improve in the short-term, exporters are demanding the government apply a series of measures to confront Uruguay’s loss of competitiveness.
Declining competitiveness, customs procedures, and soybeans to the “rescue”
Teresa Aishemberg emphasized to El Pais that the Exporter’s Union called on the government to take several measures to improve Uruguay’s competitiveness. These measures include a reduction in employer contributions and or improvements in export pre-financing.
“What’s more there are hidden costs. There are delays in the procedures and logistics aspects generate financial costs to businesses when these procedures slow down”, said Aishemberg.
The export sector also called for cheaper energy and said that Uruguay’s energy costs are not very competitive compared to the region.
The report spared no criticism of the government and annoyed the executive branch. Although Uruguay’s Exporter’s Union has called for measures to address the country’s declining competitiveness, it has distanced itself from the report and emphasized that the Union was not involved with the report.
Up to now, what is “rescuing” Uruguay’s export numbers is soybeans. Soy bean exports grew 32.9% in the first 8 months of 2013 compared to 2012 and totaled $1.814 billon USD. Out of every $100 USD Uruguay has exported in 2013, $28 USD has been soybeans.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Despite the current logistics issues at the Uruguay’s Nueva Palmira port, it is one of the fastest developing ports in all of Mercosur. Nueva Palmira’s advances in infrastructure and shipment volumes, has led the Bolivian government to begin talks with Uruguay about using the port as an outlet for Bolivian goods into the Atlantic.
The head of the Bolivian Ports Administration, reported that the organization had inspected Nueva Palmira to evaluate using it for export’s from Bolivia’s mining sector.
Bolivian mines currently export from the Chilean port of Arica but production increases have forced Bolivia’s government to seek alternatives. Nueva Palmira is seen as the best option.
The President of Uruguay’s National Port Administration (ANP) emphasized that the project is not new and Bolivia has been considering this possibility since 1976, although it much is closer to becoming a reality this year.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper Todo Logistica. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Alcoholes del Uruguay (ALUR) is a subsidiary of Uruguay’s state owned oil company ANCAP. It produces biofuels, animal feed and other agro-industrial projects.
Tomorrow Uruguay’s state-run agro-industrial company, Alcoholes de Uruguay (Alur), and Parque Sur will sign a public-private strategic agreement to stimulate agricultural production and in center of the country. Alur is attempting to secur a supply of grain for when it opens a second ethanol plant next year.
In a conversation with the Uruguayan newspaper El Observador, the executive director of Alur, Leonardo De León, said that the agreement aims to transform Parque Sur into a “important supplier” of grain for all of Alur’s different biofuel production processes, including its two biodiesel plants (which use sunflower, canola, and soy) and the ethanol plant (sorghum) it has under construction in Paysandú. “The idea is to develop an agricultural basin where Alur can get the raw materials that it needs for its industrial processes”, explained De León.
Additionally, Parque Sur will be a distributor of the cattle feed that Alur produces and will also store grains for Alur in its industrial park. “This is another advance for the policy of public-private alliances that Alur is creating in different parts of the country” said De León.
As part of the agreement Parque Sur will take over negotiating different planting contracts with grain producers and arranging grain shipments.
Parque Sur is a two-year-old agro-industrial park in Fray Marcos. Its director Claudio Kröger told the Uruguayan newspaper El Observador it expects Uruguay’s industry ministry to grant official recognition as an industrial park soon.
The property features all basic services such as fiber optics, electricity, running water and truck parking. There are four business operating inside the park. One is Uruguay’s principal milk producer, New Zealand Farming System Uruguay (NZFSU) which has built a feed plant that supplies 50,000 cows. The other three businesses in Parque Sur are transportation companies. Additionally, the local government designated two hectares inside the park for innovation and to promote new industrial businesses.
Kröger explained that the strategic alliance between Parque Sur and Alur will expand agriculture in the Santa Lucía river valley, Lavalleja, Canelones, San José. “The idea is to turn this area of the country into a surplus producer of animal feed”, he said. The director of Parque Sur indicated that their cooperation with Alur will involve the supplying grain to the new ethanol plant Alur is constructing in Paysandú. Additionally, they will construct a 30,000 ton grain storage facility in Parque Sur.
Alur is a subsidiary of Uruguay’s state oil company Ancap. Last year, it produced 45,000 tons of biodiesel.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
The number of Uruguayan workers receiving unemployment benefits increased significantly during July 2013 reaching 38,586 people, a 19.8% increase over July 2012.
More workers received benefits this July than at any point since 2002, when 41,154 workers received benefits. There were also fewer workers eligible for Uruguay’s benefits system in 2002.
The amount of workers receiving benefits increased 12.8% during the twelve months since July 2012 according to data from the Banco de Previsión Social (BPS) reviewed by the Uruguayan newspaper El País. July’s number also represented an increase of 14% over this June’s benefits numbers.
Workers from Uruguay’s industrial manufacturing sector made up a significant part of the increase between June and July. 3,864 industrial manufacturing workers started collecting unemployment benefits in July, a 64% increase over June and 13.5% over 2012.
The sector with the second most workers collecting unemployed was construction with 8,534, although that number has been stable through 2013.
In Montevideo, 18,489 workers collected unemployment benefits compared to 20,097 in the rest of the country. After Montevideo, the cities with the highest number of workers on unemployment were Canelones with 5,919, Moldonado with 3,970, Colonia with 1,356 Paysandú with 1,097 and San Jose with 1,011.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Pais. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Uruguay fell 11 places in the World Economic Forum’s ranking of global competiveness moving from 74 in 2012 to 85 in this year’s rankings. A variety of factors led to the decline:
Uruguay sustains one of the region’s sharpest drops, falling 11 places in the rankings to 74th position. Despite important gains in reducing the procedures and time needed to start a business (29th and 25th, respectively) and slight increases in ICT use (46th) and market size (86th), Uruguay drops systematically in all the remaining eight pillars that drive competitiveness. Worrying inflationary pressures above 8 percent coupled with relatively high government debt (101th) have deteriorated the macroeconomic conditions (63rd) of the country and cast some doubt about the sustainability of recent growth rates. Although Uruguay still benefits from one of the best functioning institutional set-ups in the region (36th), there are rising concerns about excessive red tape (89th) and wasteful government spending (95th), as well as about the business cost of crime and violence (88th). Labor markets are considered very rigid (139th), with some of the world’s most restrictive hiring and firing practices (138th) and a lack of flexibility in wage determination (144th) that does not match pay to productivity (143rd). As Uruguay’s economy moves toward higher levels of development, some doubts arise about the ability of the traditionally praised educational system to generate the skills that businesses require (107th), the overall availability of scientist and engineers (117th), and the innovation capacity of the country more broadly (69th). Improving the macroeconomic management of the country while addressing its labor market conditions, along with enhancing its innovation capacity by improving the quality of its educational system and the technological capacity of indigenous firms, will be crucial to shift the declining trend.
Chile led Latin America in 33 place, followed by Panama at 40. Brazil fell 8 places to 56 and Argentina fell 10 places to 104. The full report on global economic competitiveness is available here.
Uruguay Business Reports original news article by Donovan Carberry.
Uruguay Business Reports 